Banks set for profits boost and job cuts

BRITISH banks expect to boost profits next year but will still axe jobs and cut back on business lending.

41 per cent of UK banks reportedly believe that the economic outlook will improve in 2013 []

According to the Banking Barometer survey by accountancy firm Ernst & Young 41 per cent of UK banks believe that the economic outlook will improve in 2013, with 59 per cent expecting their individual performance to strengthen.

The banks believe most of the growth will come from improved retail performance with deposit numbers set to rise.

However the outlook for their investment banking divisions remains weak.

Despite the optimism the survey found that more than 64 per cent of banks expect to cut jobs in the first half of 2013, compared with 12 per cent six months ago, with most to fall in their investment arms.

Head office and administrative jobs are most under threat.

Banks are being forced to reconsider their business models and job losses will be inevitable

Steven Lewis, lead global banking analyst at Ernst & Young, said: "Banks are being forced to reconsider their business models and job losses will be inevitable as they focus on a smaller number of core areas."

The banks will also remain risk-averse with a further squeeze in business lending likely.

The survey said 50 per cent expect loans to construction and commercial real estate firms to become more restricted.

A third said lending to IT, financial services and transport companies will also suffer.